The Impact Of New Lease Standards On China Eastern Airlines And Countermeasures

On December 7,2018,the Ministry of Finance officially revised and issued the"Accounting Standards for Business Enterprises No.21-Lease(Revised)”,which stipulates that enterprises listed both at home and abroad at the same time,as well as enterprises listed overseas which adopting IFRS should implement the revised Accounting Standards since January 1,2019.Other enterprises should implement it since January 1,2021.The new standard has made a huge change to the lessee’s operation of lease business.In view of the huge amount of off-balance sheet operating lease business in the air transport industry,this paper takes all the eight companies listed of this industry as the research object to conduct an in-depth analyze of the financial impact brought by the new lease accounting standards.This paper has the following research findings:To begin with,the new leasing standards will have a great impact on the balance sheet and income statement of China Eastern Airlines.Depreciation of subsequent right-to-use assets and interest charges on lease liabilities will affect the income statement,resulting in an increase in profit before interest and taxes.The increase or decrease of the items in cash flow statement has no impact on the total amount.In addition,the implementation of the new standards will have different degrees of influence on the financial indicators of different enterprises,depending on the enterprise’s own financial and operating conditions and other factors.The length of the lease term of the lease contract,the distribution of the rental repayment and the depreciation method of the leased asset will have an impact on the financial performance of China Eastern Airlines.The enterprise can adjust these factors of the new contract to achieve a certain degree of control over financial performance and reduce the impact on the new regulations when they are implemented.Based on the analysis results,this paper proposes the following countermeasures for China Eastern Airlines:modify the lease period,the distribution of pre-payment and post-payment and the depreciation method of the newly signed operating lease contract in order to adjust the performance of the financial report;gradually reduce the proportion of operating leases in aircraft assets.Instead,move to more financial leasing and self-purchase asset to increase the control over assets;strengthen information management of operating lease contracts,standardize registration factors,optimize business processes,and use the lease accounting systems to meet the initial objectives of reporting compliance and reduce the cost.The main innovations of this paper are listed as follows.Firstly,the arguments of this paper were fully and reasonably assumed,limiting the variables and enhancing the comparability of the performance of companies in the same industry.Second,this paper includes the consideration of the adjustment of the overhaul preparations for renting aircraft under operating leases before and after the change of accounting standards.The overhaul cost is often of huge amount,but the existing researches often ignore its impact.Thirdly,The paper studies the impact of the specific implementation factors of the operating lease on the financial status,and clarifies the specific impact of certain changes of a certain factor on the financial statements of the company,so that the company can control the changes of the financial statements,and in a certain extent,to achieve its own business goals.